a.
Identify the financial performance measures that can be calculated for City A.
a.
Explanation of Solution
Government Accounting Standards Board (GASB): Government accounting standards board (GASB) is an independent board that establishes reporting standards for the local and state government, and also for government not-for-profit organizations that has to adhere to the generally accepted accounting principles (GAAP).
The following ratios can be calculated:
- Business-type activities self-sufficiency.
- Revenue dispersion.
- Inter-period equity.
- Quick ratio.
- Debt to assets.
- Capital asset condition.
Current ratio .- Unrestricted net position.
- Change in net position.
b.
Ascertain the various ratios for City A for 2020.
b.
Explanation of Solution
Government-wide financial statements: These are the financial statements that report the government’s net position and changes in net position. These statements report the governmental activities, business-type activities, and the activities related to proprietary funds and fiduciary funds. These statements are prepared based on the accrual accounting. The two government-wide financial statements are Statement of Net Position and Statement of Activities.
- Compute the unrestricted net position:
For Governmental activities:
For Business type activities:
The unrestricted net position is 17% for governmental activities and 68% for business type activities.
- Compute the Capital asset condition:
For Governmental activities:
For Business type activities:
The capital asset condition is 40% for governmental activities and 36% for business type activities.
- Compute the Debt to assets ratio:
For Governmental activities:
For Business type activities:
The debt to assets is 57% for governmental activities and 49% for business type activities.
- Compute the current ratio:
For Governmental activities:
For Business type activities:
The current ratio is 2.76 times for governmental activities and 5.95 times for business type activities.
- Compute the quick ratio:
For Governmental activities:
For Business type activities:
The quick ratio is 2.68 times for governmental activities and 5.85 times for business type activities.
- Compute the change in net position:
For Governmental activities and Business type activities:
The change in net position is $4,900.
- Compute the interperiod equity:
For Governmental activities and Business type activities:
The interperiod equity is 1.10 times.
- Compute the BTA self-sufficiency:
For Governmental activities and Business type activities:
The BTA self-sufficiency is 1.80 times.
- Compute the revenue dispersion:
For Governmental activities:
The revenue dispersion is 34.6%.
- Compute the bonded debt per capita:
For Governmental activities:
The bonded debt per capita is $522.68.
- Compute the available legal debt limit:
For Governmental activities:
The available legal debt limit is 79.5%.
- Compute the property taxes per capita:
For Governmental activities:
The property taxes t per capita is $522.68.
c.
Assess the overall financial condition on the City A.
c.
Explanation of Solution
The overall financial condition of City A, is very strong. Most of the ratios indicate a positive performance, however a few things need to be taken care of.
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Chapter 10 Solutions
Accounting For Governmental & Nonprofit Entities
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